A consulting aerospace engineer at Aerospatial estimated AW values for a present
ID: 1206382 • Letter: A
Question
A consulting aerospace engineer at Aerospatial estimated AW values for a presently owned, highly accurate steel rivet inserter based on company records of similar equipment.
If Retained This
AW Value,
Number of Years
$/Year
1
–62,000
2
–50,000
3
–47,000
4
–53,000
5
–70,000
A challenger has ESL = 2 years and AWC = $-49,000 per year. If the consultant must recommend a replace/retain decision today, should the company purchase the challenger? The MARR is 15% per year.
If Retained This
AW Value,
Number of Years
$/Year
1
–62,000
2
–50,000
3
–47,000
4
–53,000
5
–70,000
Explanation / Answer
the worth of investment after 5 years will becomes as
= 62,000*0.87= 53940
= 50,000*0.756= 37800
=47,000*0.657= 30879
=53,000*0.571= 30263
=70,000*0.497= 34790, the total investment will becomes= $187672
the total return for 5 years is= 49000*3.351= 164,199
the net return is = 164,199- 187,672= (23473 loss)
this project will provide losses only, so it is better to reject it
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